The Insurance Brokers Association of Ontario (IBAO) is “generally” supportive of a recent report making 35 recommendations to reform the province’s auto insurance system, but one personal injury lawyer cautions that disputed claims will still occur while a lawyer representing insurers predicts that at least one recommendation from the report could be “buried.”
David Marshall, former president of the Workplace Safety and Insurance Board (WSIB), was appointed in 2015 to review and make recommendations on Ontario auto insurance.
His final report – Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario – was released April 11.
Auto insurance claims costs “continue to rise” in Ontario “while automobile accidents continue to fall,” Marshall reports, adding that neither the behaviour of personal injury lawyers nor “excess profits” of insurers are to blame for the situation.
“We are very supportive of David Marshall’s position of trying to get people back to their health or fixed as fast as they can and back to their workplace,” reports Colin Simpson, chief executive officer of IBAO.
Ontario’s Statutory Accident Benefits Schedule “never intended the auto insurance system to be a cash jackpot,” writes Marshall. “Many insurance companies, however, are incented not to see their role as providing medical care to clients. Rather, they are incented to close their liability with as little cash cost as possible and, hence, they introduce the practice of negotiating cash settlements with claimants in lieu of medical treatment, future wage and other future benefits under the SABS,” he notes.
One of the 35 recommendations that Marshall makes is that insurers “change their role from managing costs to delivering care to their customers.” He contends that insurers “need to change their claims management and related practices in the process.”
In its budget document for 2017-2018, released April 27, the Ontario government reports that it is “reviewing” Marshall’s report “and will be hosting consultations in the coming months.”
Marshall suggests the solution to the high premiums in Ontario “lies in focusing on timely, appropriate medical care, not cash settlements.”
One of his recommendations is for a system of a hospital-based independent examination centres (IECs), which would be different from the designated assessment centres (DACs) that were in place until 2006.
An IEC system would not be “concerned in any way with approving or denying a claim,” Marshall reports.
In the workers’ compensation systems of both Ontario and Alberta, “the patient is referred to a regional evaluation centre,” he points out.
REBIRTH OF THE DAC?
But in reality, Marshall’s proposed IEC “is a new kind of DAC,” contends Philippa Samworth, a partner with Dutton Brock LLP, who gave a presentation April 27 at BDO Canada LLP’s 21st Annual Accident Benefits (AB) Conference.
When the DAC system was brought in, Samworth recounted, “we really wanted to have hospitals as part of our DACs.” Instead, she added, “we had maybe three hospitals. Hospitals did not want to do auto insurance stuff. Family doctors don’t want to do auto insurance stuff. Why would a hospital?”
Personal injury lawyer Adam Little, a partner with Oatley Vigmond LLP, echoes Samworth’s comments.
“There is no reason to think that such a system would work now, whether centred at already over-burdened hospitals or elsewhere,” says Little.
“Binding a catastrophically injured claimant’s future to the opinion of a single ‘independent’ examination is simply unfair. The fact that these assessors rely on recurring work from insurers will always offer the appearance of bias in the eyes of the claimant, and for good reason. Making these assessments binding, final and beyond dispute is draconian and inequitable,” he comments.
Marshall recommends in his report that an evaluation “take place much earlier in the treatment cycle.” IECs, he suggests, should assess auto claims “as precursor to a mediation or arbitration hearing or litigation.”
By contrast, DAC assessments were “often long, drawn out and expensive.” They also “frequently acted on behalf of insurers or claimants in providing medical assessments to them separately,” Marshall writes.
He notes that with the WSIB, “the injured party does not have to submit to multiple separate examinations.”
Still, Samworth is not convinced that an IEC system will work well, she suggested at the BDO (AB) conference, held at the Liberty Grand conference centre in Toronto.
The job of an IEC “is to go and say, ‘We are going to work out a future plan of care and we are going to direct what future treatment plans there should be and P.S., if you don’t like what our decision is, and what we recommend, that’s too bad because it’s binding,” is how Samworth characterizes Marshall’s recommendation. “It’s binding on you and it’s binding on the insured. You can’t go to your family doctor and say, ‘I don’t want to do that.'”
Samworth also questioned whether or not the province could afford to provide lifetime care for seriously injured accident victims.
“When you have no more of your (catastrophic impairment coverage) money left and when you are seriously injured, there’s going to be a care program that allows you to be covered under (Ontario Health Insurance Plan, OHIP),” Samworth told conference attendees.
“I think that alone may allow us to suspect that some aspects of (the Marshall report) may be buried because I don’t think the OHIP system can afford these care programs,” she said.
But officials with Intact Financial Corporation seem encouraged by some of Marshall’s recommendations.
In its management discussion and analysis (MD&A) released May 2, Intact alluded to Marshall’s recommendation on IECs and his recommendation against cash settlements for AB specified in legislation and medical and rehabilitation benefits.
“We are encouraged by these recommendations to streamline the insurance system in Ontario and direct more of the resources intended to support the needs of injury victims, to claimants themselves,” Intact reports.
The Marshall report is “probably the best description we have to date of what is wrong” with Ontario auto, contends Don Forgeron, president and chief executive officer of Insurance Bureau of Canada (IBC).
Without endorsing or rebutting any of Marshall’s recommendations, Forgeron made his comments April 25 to the report during IBC’s annual Financial Affairs Symposium.
Simpson echoes Forgeron’s view.
“Within this report you can see that the reforms over the last 30 years only make slight differences and then after a few years, it goes back to not being as effective anymore,” Simpson says. “So we do need significant change on the auto product for sure. So this is definitely heading down the right path.”
MAKING STAKEHOLDERS WEALTHY
Marshall “notes that a complex system of insurance benefits, combined with challenging legal processes siphons resources intended to support the need of injury victims,” Forgeron reports.
“Paraphrased, the system is not about making people well,” he suggests of the Marshall report. “It’s about making stakeholders wealthy and that’s what’s wrong with the system.”
Marshall recommends that the province amend auto insurance regulations “to include only broad principles and entitlements for benefits.”
Ontario should establish an “arms-length regulator with a skills-based board” to oversee auto insurance, he maintains.
“In many ways, the need to have lawyers involved to negotiate settlements in what should be a straightforward, no-fault, accident benefits system signals a failure in the system,” Marshall contends. “There should not be so much uncertainty that neither accident victims nor insurers are confident as to what constitutes fair benefit.”
Marshall also argues that the province “should consider” requiring that “contingency fee arrangements be filed with the regulator.” The province should also consider “restricting contingency fees in personal injury cases,” he suggests.
That causes concerns for lawyers like Little. “The concept of an auto insurance regulator being entitled to restrict the nature and terms of lawyer’s retainer agreements (which are protected by lawyer/client privilege) is well beyond the scope of such an authority,” he says.
“Retainer agreements are already governed by the Law Society of Upper Canada, the legislature and, ultimately, the courts,” reports Little. “Another layer of regulation is unlikely to increase systemic efficiency.”
There was already a movement afoot to cap contingency fees even before the Marshall report was released.
Bill 103, tabled March 8 by backbench MP Mike Colle, proposes to cap contingency fees, in bodily injury lawsuits, at 15%.
Marshall suggests in his report that some contingency fee arrangements are not transparent. He recommends the province consider mandating that settlement cheques “be made payable jointly to the accident victim and the lawyer.”
Marshall further recommends “evidence-based treatment protocols, used extensively in several Canadian jurisdictions, that cover most common injuries.”
Intact alluded to this recommendation in its MD&A, but Little disputes the notion that “evidence-based treatment protocols” will serve to avoid disputes.
“Such treatment protocols are not tailored to the individual needs of the injured person, which include factors such as severity of the crash, age, body type, prior medical and psychological history, reaction to treatment or even the nature of the person’s employment,” he says.
“The idea that a construction worker will always benefit from the same treatment plan as a call centre employee is absurd. From my perspective, the implementation of these cookie-cutter treatment protocols across the board will have the opposite of the desired effect. It will result in more disputes, not less,” Little argues.
In his report, Marshall also recommends changes to the tort system, suggesting that the province create “a prescribed list of documents that must be produced,” in personal injury auto lawsuits. The government should also allow for earlier “examination under oath for both claimants and expert witnesses” and provide for “some form of case management,” he writes.
“Early examinations under oath are already permitted under Ontario insurance law,” reports insurance defence lawyer Kadey B.J. Schultz, co-managing partner of Schultz Frost LLP. “Early examinations under oath of expert witnesses, in accident benefits disputes, can be incredibly valuable, but can also drive up costs,” Schultz explains.
Marshall recommends that the provincial government consider creating an “Office of the Driver Adviser” or something similar.
“Consumer education in the field of auto insurance is a key component of a well-functioning system,” he writes.
Such an office would “explain how auto insurance works, how to access benefits efficiently and the rights and obligations of drivers.”
This recommendation caught the eye of IBAO. “We are one of the main advocates for the consumer and one of the strongest educators of consumers out there as to what is or is not available by way of product choice,” Simpson notes. “We need to ensure that the broker voice is heard in that process.”
Marshall notes he is also concerned about the amount of money spent on lawyers and with the current tort system.
Among other things, Marshall says that there should be full deductibility of AB awards from tort awards.
“The tort system is confrontational, time-consuming, involves the cost of legal counsel and experts, and ties up negotiating time if settled out of court or court time if cases go to trial,” he writes.
“Moreover, using the court system to get injured parties what they deserve results in a significant leakage in the benefit they actually receive since the award they get is reduced by the need to pay expert witnesses and large fees to lawyers.”
Intact reports in its MD&A that it is “too early to tell” how Marshall’s recommendations would be implemented (if at all), but officials with the insurer are “confident” that the provincial government “understand the serious impact of the current inflationary trends” in auto claims costs.
Without specifically endorsing any recommendations in the report, Forgeron contends there are “perverse incentives” built into Ontario auto insurance and “that creates a focus not where it ought to be.”